Rapid Response and Fragile States – New Reforms

1. Rapid Response and Fragile States – New Reforms • New Policy Framework (OP 8.0) • Accelerated and Streamlined Procedures (BP 8.0)

2. Why Change Policy? “There is a growing demand for reform in how the Bank does business, particularly fiduciary, and how to build country capacity and use it more effectively. Better, cheaper, faster—and the purpose of this forum is to exchange, debate, and move forward on how to reform and refine our requirements.” Jeff Gutman March 24, 2008

3. Why change policy? (cont’d) • Increasing number of emergency operations • 74 emergency operations in FY ’89-‘00 • 94 emergency operations in FY ’01-’06 • Inappropriate response time • PCD to Effectiveness over 9 months • First disbursement later • 34% of emergency operations were flagged for slow disbursements (FY ’01-’06) • Time needed to grant waivers

4. New Policy Framework:increased demand for Bank engagement • Definition refocuses from cause to impact;includes imminent emergencies • Clarified objectives include support for preservation of human, social and institutional capital and peace-building4 • Clarify Bank support for comprehensive and integrated multi-donor recovery programs (that may include relief, security and peace-building)

5. New Policy Framework (cont’d) • Bank’s involvement still limited to its areas of competence (PFM, reintegration of combatants) • Support start-up implementation in weak capacity countries (PPF increased to $5 mill, limited bank execution, alternative arrangements for NGOs and UN agencies, pre-qualified procurement agents and contractors) • Allow speed by shifting controls and risk mitigation measures from ex ante to ex-post • Intensify supervision effort and ex-post measures as needed to address risks

6. Risks and Risks • “In particular, the revised policy and accompanying guidelines would clarify that the risks associated with the need for much greater speed early in an emergency operation should be balanced by more careful and intensified supervision later in the operations, including additional post-reviews, audits and other measures, and application of appropriate remedies. In addition, when the situation has stabilized, it is appropriate to gradually transition toward regular Bank processes and safeguards, as needed, to mitigate and address risks.” (para. 32 Board Paper

7. Risks and Risks (cont’d) • OP 8.00, paragraph 7 • “The Bank recognizes both the inherent risks involved in working in emergency situations, including the risks and lost opportunities associated with a delayed response, and the critical importance of speed, flexibility, and simplicity to an effective rapid response. As a result, emergency operations: • (b) involve a different balance between ex-ante and ex-post controls and risk mitigation measures compared to regular operations, including on issues of fraud and corruption, requiring intensified supervision support to address such risks . . . . “

8. Sample Minutes • The meeting agreed that this operation would need an intense supervision effort . . . The Country Director. . . agreed to provide a higher level of Bank budget for supervision, and the team will provide [the CD] with a breakdown of the estimated costs of the proposed supervision for [CD] approval.

9. Greater Financing Flexibility • PPF • Amount increased from $2 to $5 million • Can cover urgent start-up activities, not just preparation • For grant only countries: provided on grant terms and may be Bank executed • Retroactive Financing • Limit increased from 20% to 40% of loan amount • Expenditure eligibility and cost sharing • OP 6.00 rules apply to all rapid response operations, even in countries without CFPs • 100% financing is assumed, unless CD determines otherwise • Allows temporary increase in cost-sharing limits in all projects in the portfolio • At borrower request • Approved by CD

10. Financing Flexibility (cont’d) • Positive List of Goods (not just imports) • Goods required for the recovery effort • Local goods procured using national emergency procedures • Fast Disbursing Contingent Loan to Address Future Emergencies • Prepared under OP/BP 10.00 rules • Includes OP 8.00 features (including positive list) • Governed by OP 8.00 once triggered

11. Accelerated and Streamlined Project Processing • Concept-Negotiations: • single one-stop review meeting which consolidates all clearances • reduced turn-around times • delegating higher authority to task teams and regional designated staff • Negotiations-Effectiveness: • proactive assistances to borrowers in satisfying Bank’s legal obligations • minimize conditions of effectiveness • facilitate cash-flow by establishing appropriate arrangements before effectiveness • High risk review processes do not apply(RVP-chaired decision meeting provides comparable oversight)

12. PR Single Decision Review Meeting Authorizing Negotiations FM LOA Record of all Clearances LEG SG Accelerated and Streamlined Procedures: Internal Reviews Concept/Ad Hoc Committee Review Decision Meeting Clearance of Neg. Package

13. Simplified Operating Procedures • Apply simplified procurement procedures and assist Borrower during early stages of implementation: • Single-source/direct contract • Shopping • Extending existing contracts • Pre-qualification • Accelerated bid times and no bid bonds • Ensure sustained flow of funds (flexible designated account procedures, payment methods and shorter turn-around time on replenishments) • Apply corporate-wide reduced turnaround standards for all reviews/clearances including for no objection letters for procurement, HR contracting • Define/agree upfront strategy for safeguard issues (allow sequential approach that ensures adoption of timely measures)

14. Institutional Back-up Regional Rapid Response • Committee covered by CD, RVP or Operations Director • Designated regional emergency legal and fiduciary staff • One stop decision-meeting chaired by RVP Networks/Sectors • Callable roster • Documented lessons learned Corporate Rapid Response • MD-chaired meetings • Mobilize action across institution and provide guidance on issues with potential corporate reputational risk • Guidance and actions list, with follow-up

15. Resources • OPCS Home page (Rapid Response) • Search “Rapid Response” • These pages provide links to procedures and guidance, as well as templates. • There is a “contact us” box for emailing the Rapid Response Core team

16. Emerging Implementation Issues • Achieving greater speed from onset of emergency to Board, still delays with signing and effectiveness • Sticking with one-stop review (issues include – readiness, design, RRC role/composition) • Making a case for and getting higher supervision budgets approved • Uncertainty about implementation in new areas, such as positive list of goods, contractor pre-qualification • Concerns about evaluations/reviews that use old bench-marks and methods • Lack of consistent practices concerning callable capacity/institutional support